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GUEST ARTICLE: The Funding Drought: The UK's Creative Industries As An Investment Opportunity

David Glick, Edge Investments, Founder and CEO, 24 November 2015

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There is said to be a shortage of funding for the UK's creative industries, whether this applies to film, music or other branches of the arts. But gaps create opportunities, so the author of this article argues.

There is, so it is claimed, a dearth of funding for the creative industries in the UK – a term relating to fields such as music or the visual arts. In recent years, for example, there has been a trend of funds being created to raise money for the “gap financing” that had been previously available to film distributors from banks. As banks have pulled in their horns because of tighter capital standards, this has left a void which hopefully new, non-bank actors can fill.

Writing on the subject of how the UK’s creative industries are an attractive opportunity is David Glick, who is founder and chief executive of Edge Investments. The editors of this publication are pleased to share his opinions and invite readers to respond.

In an environment of market volatility and low interest rates, investors are increasingly looking to alternative asset classes and sectors to maximise their returns. This means that the most overlooked and misunderstood industries are sometimes the most attractive.
 
Take the creative industries sector currently on an outstanding growth trajectory. This sector is the fastest growing in the UK, now worth £79 billion per year to the economy, generating revenues of more than £8 million ($12.2 million) an hour; the creative economy represents 10 per cent of UK gross domestic product. Globally, the sector is worth £1 trillion, and can boast of a growth rate of 6 per cent per annum.
 
The creative industry, which is predominantly made up of small and medium sized companies who create, manage and commercialise intellectual property in sectors such as television, radio, computer games, music, advertising and fashion, is particularly attractive thanks to the scalable revenues which these companies can achieve. For example, Mirriad uses patented computer vision technology to digitally insert advertising into visual content at the point of transmission. Fixed costs are low and think of the scale of content that it can be applied to – whether that’s classic films from the 1930s or tailoring the latest James Bond to a different geography.
 
Within the creative economy, many of these sub-verticals are experiencing explosive growth; for example, the UK's independent television production industry is now worth more than £3 billion - quadruple the industry’s value only nine years ago.
 
Britain is learning to shout about the achievements of their creative industries sector from film to 3D printing in architecture. For example, the UK is one of only three countries in the world (along with the USA and Sweden) to be a net exporter of music. The Grand Theft Auto video game series has topped well over 100 million sales and was created by Rockstar North in Edinburgh. And whilst the success of the Harry Potter franchise and films are well known; less so is the fact that thirteen of the top 35 global box office films of all time are based on the works of British novelists.
 
It is unsurprising therefore, that Britain punches above its weight when it comes to the creative industries. Sadly, this global benchmark of innovation has been overlooked as an opportunity for investors to deploy capital and share in entrepreneurial success. So why is this and where does the opportunity lie?
 
Investors are starting to realise that the sector is not just the domain of high risk angels. In fact, it has emerged that the failure rate of creative industries start-ups is far below that of tech and other sectors. In addition, in many cases these are the companies pioneering new business models that require a little more thought and investigation by potential investors.  
 
However, the fact that the creative industries are underserved and overlooked by the traditional finance providers presents a real opportunity for the investment community. By their nature, many of these companies may start with a small number of employees, and a high degree of entrepreneurial flair. There is a real gap to fill, and a genuine need to support and assist creative businesses to grow and, of course, share in their success.
 
Investors can provide the crucial capital and mentoring resources to stimulate growth and innovation at these firms – and generate exciting returns for themselves.
 
It certainly helps that the UK government is backing the creative industries through the tax credits for film, high-end television, animation, theatre and video games in its first step to making Britain a creative powerhouse but it’s private sector investors who need to seize the opportunity.
 
Now is the time for businesses, entrepreneurs, and investors to mobilise the necessary capital to make Britain a global hub for the creative industries and fuel further growth.

 

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